Tax Credits DO Help to Break Up Families; Parents Encouraged to Divorce to Claim Higher Benefits, Says Report

Tax Credits DO Help to Break Up Families; Parents Encouraged to Divorce to Claim Higher Benefits, Says Report

Byline: Steve Doughty Affairs Correspondent

LABOUR'S tax credits have caused thousands of families to break up, an authoritative study said yesterday.

The flagship scheme is blamed for a doubling of the divorce rate among lowincome parents with young children.

Tax credits, introduced a decade ago to cut child poverty, were supposed to help single mothers and hard-working families.

But a so-called 'couple penalty' means that a mother can pick up more than [pounds sterling]100 extra a week by splitting from her partner.

Evidence published by the Royal Economic Society said that tax credits give mothers married to men on low earnings an incentive to divorce.

The study found that the divorce rate among mothers with low-income husbands rose by 160 per cent in the three years after the benefits were brought in.

Marco Francesconi, of the University of Essex, said that tax credits had limited the very important.' benefits of marriage, encouraged mothers to work and produced a 'greater risk of family disruption'.

He said: 'The result that tax credits had strong employment and divorce effects on married mothers in poor households is very important.'

The findings, published in the highly-influential Economic Journal, are the first hard evidence that tax credits are working to drive couples apart.

Jill Kirby, of the Centre for Policy Studies, a centre-Right think-tank, said: 'Tax credits were sold as the solution to poverty for hard-working families. Now we know they are the benefit that breaks up families.'

Professor Francesconi and two senior colleagues based their research on 3,235 couples tracked from 1991 by the British Household Panel Survey.

'Women married to a partner who did not work or who worked fewer than 16 hours a week were more than 2 per cent more likely to dissolve their partnership after the reform than their childless counterparts,' the report said.

'This is a substantial impact on the divorce rate, representing an increase of almost 160 per cent with respect to the pre-reform period.

'This response could have been an unintended consequence of the reform, which may turn out to be important for the evaluation of the longer-term success of the reform itself.'

Tax credits provide a supplement to pay for parents who work for more than 16 hours a week. From the start, they were heavily skewed toward pushing single mothers into jobs to relieve poverty among loneparent families.

Claimants are paid through their wages by employers who are required to adjust take-home pay according to their workers' entitlements.

Tax credits are higher for those with children, and they include payments of up to [pounds sterling]300 a week to cover costs of daycare for working mothers. …

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